Karma recall disrupts GoPro
GoPro (GPRO) has had a troubled start in the drone business. The company was forced to recall its Karma drone from the market shortly after launch due to a problem that caused the drone to collapse from the sky.
GoPro fixed the problem, however, and Karma returned to the market earlier this year. But the recall meant a loss of sales opportunities to rivals like China’s (MCHI) DJI. GoPro also lost cash and profits through refunds to affected Karma purchasers.
The best-selling drone in the US
How has it been for GoPro since Karma returned to the market? If recent remarks by GoPro CEO (chief executive officer) Nick Woodman and the consumer drone market outlook are anything to go by, the prospects for Karma look bright.
According to Woodman, citing data from NPD Group’s Retail Tracking Service report, Karma was the second-best selling drone brand in the US (SPY) in 2Q17, which suggests a powerful return to the market for the drone.
Limited contribution to top line
Still, the impact of Karma on GoPro’s top line remains minimal. For example, less than 10% of the company’s sales in 2Q17 came from Karma. But currently, this tiny revenue contribution from Karma conveys a sense of opportunity rather than of trouble.
The revenue potential for Karma is huge (QQQ). According to Goldman Sachs Research, the consumer drone market will be a $3.3-billion economy by 2020—up from just ~$700 million in 2014.
For GoPro, the major challenge in this market is coping with the competition. The drone market is attracting more and more players. GoPro already has DJI to deal with, and Snap (SNAP) is also rumored to be eyeing the consumer drone market.